I've been doing some analysis (yes this is what I do for fun) of retirement portfolio growth using a typical scenario. All numbers are adjusted for 3% inflation, but do not take into account taxes:

Joe works for 41 years, from age 20 through age 60. His starting income is $30,000 per year, growing at 2.5% per year to $80,552 by the time he retires. Joe saves 15% of his income through his working years, and this savings grows at 7% per year.

By the time he retires, Joe will have saved $1,327,048, giving him $53,082 per year in retirement income (4% withdrawal rate) in addition to Social Security, etc. Joe should be able to maintain his pre-retirement lifestyle in this case, given that he'll spend less at retirement, and his income will get better tax treatment.

Here's the part I thought was interesting. At the end of his 40th year, halfway to retirement, Joe will have saved $246,098, only 12.8% of his retirement goal. However, the retirement value of that money (after 20 more years of growth) is actually $952,322, or 71.8% of the target.

Just goes to show the power of the money you save early in life, and that it's not how much you have, it's how old you are when you have it.

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